Hurricane Harvey Hammers Restaurants And The Worst Is Yet To Come

Posted: Aug 29, 2017



"Hurricane Harvey is going to have a major impact on the restaurant industry," Bonnie Riggs, analyst with The NPD Group, told CNBC.

Restaurant brands that have a significant number of locations in the Texas and Louisiana area, stand to see sales shrink in the third quarter because of closures and displaced workers.

Evacuees returning to their homes in the aftermath of the storm will have a restricted disposable income and won't be spending on restaurants as frequently.

Hurricane Harvey ripped through Houston and other parts of Texas over the weekend, with areas in the region expected to see a year's worth of rainfall in the span of a week. The hurricane hit in the heart of oil and gas country, but that's not the only industry to see devastation due to severe flooding.

"It's going to have a major impact on the [restaurant] industry," Bonnie Riggs, analyst at The NPD Group, told CNBC in a phone interview. "Because even if these restaurants are able to be open or if some are able to open up later on down the road, the demand is just not going to be there because these people have just been totally wiped out of everything."

With thousands focused on rebuilding their lives and homes, going out to eat will not be a priority. Evacuees will have restricted disposable income, with most of their funds going toward rebuilding. Riggs said that customers will not have the luxury of eating out very often, if at all, and restaurants in that area will struggle for the foreseeable future because of this.

"We know what happened to the industry when Katrina hit, but this is far greater," Riggs said.

There are some 13,000 restaurants in Houston, Riggs said, and more than 7,000 of those locations are chain restaurants.

Restaurant brands that have a significant number of locations in the Texas and Louisiana area, stand to see sales shrink in the third quarter because of closures and displaced workers. And that could continue into the fourth quarter.

On Friday, ahead of the storm, David Tarantino, a Baird analyst, determined which restaurants would see the most disruption from Hurricane Harvey. He said that Chuy's, Wingstop, Zoe's Kitchen and Jack in the Box were likely to be the most affected by the storm.

Tarantino's data depicts what he expects would happen if half of each company's locations in Texas and Louisiana lost 100 percent of sales for the full five days the storm is expected to hover over the area.

"We would view this potential impact as a hypothetical case rather than a precise estimate," he wrote in a research note Friday. "Furthermore, we would consider any impact on sales as a one-time issue that should have fairly immaterial impact to the value of these businesses."

Tarantino did not immediately respond to a request for further comment.


Sarah Whitten
August 28, 2017
Source: CNBC.com




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